Released on: March 27, 2008, 10:43 pm

Press Release Author: Anil kumar yadav

Industry: Management

Press Release Summary: Borrowed Funds: The loan made for a business purchase from a
bank or private party. The private party can be the seller or some friend or
relative who might be willing to make a loan. This is borrowed money that must be
paid back to someone at some time in the future.



Press Release Body: Borrowed Funds: The loan made for a business purchase from a
bank or private party. The private party can be the seller or some friend or
relative who might be willing to make a loan. This is borrowed money that must be
paid back to someone at some time in the future.

Cash Requirement: This is the invested cash required to both buy a business, and
working capital-to run the business. The amount of cash needed to make the business
purchase and run the operations of the business after deducting all borrowed funds,
regardless of source.

Sellers Discretionary Earnings / Owners Total Benefits: This is the total of all the
non-business related benefits going to a business owner or his family on an annual
basis that have been paid for, by the business. Included in this is definition are
taxable profit from operations, unreported cash income, owners salary, salaries to
non-working family members, any amount over the fair market value of salaries paid
to working family members, family auto expenses, family telephone, family office
expenses, health and life insurance for any or all family members, pension plan/
profit sharing contributions paid for the benefit of family members. This can also
be stated as the reason why most people go to work everyday; they get family support
for working.


Calculation notes:
1. Taxable profit from operation $_________________ (+)
2. Cash $_________________ (+)
3. Owners Salary $_________________ (+)
4. Salaries of non-working family members $_________________ (+)
5. Amount over the fair market value of wages
of working Family members $_________________ (+)
6. Family Auto Expenses $_________________ (+)
7. Family Telephone Expense $_________________ (+)
8. Family Office Expense $_________________ (+)
9. Health and Life insurance of
Any/all family members $_________________ (+)
10. Pension plan/profit share family members $_________________ (+)
Total Seller Discretionary Earnings: $_________________

Return on Investment: We need to have this stated as a dollar amount in Formula two.
ROI is calculated as follows:

Cash Requirement X "a Percent" - the greater the risk, the higher the percent

First we must determine what the interest rate return we wish on our investment.
This is a very subjective percentage and a change in this number can change the
whole result of this analysis. If it is of any help, many financial investors in
"Corporate America" feels they need to get a 20% return on their invested capital.
Companies do not always make money and therefore the possible loses are built into
the ROI. Some of the reasons are: companies are bought and go broke, overseas
competition causing expectations of growth and income not to be met, and lastly
government regulations periodically close whole industries. These are just some of
the many risks involved in owning a business.

Putting your money in a bank has little risk, because the Federal Government insures
your deposits in the bank. The stock market has a lot of risk that many people do
not fully understand, causing them to accept a long term ROI of 10-13% from mutual
fund investments. A 95% drop in stock prices like the dot.com stocks or what
happened when we had the oil embargo in 1992 are indications that the stock market
can be a much higher risk than people realize.

I personally feel that owning your own business and buying real estate are much
lower risks, providing a much higher return. The proof of this can be found in the
number of people who got rich in real estate and the over 25 million small business
owners across this country.

Figure out what ROI you want and insert this number as .20 amount to represent 20%
or .06 to represent 6% ROI. This is an annual return on invested money.

Once you have a percentage return on your investment we need to multiply it by the
Cash requirement in order to come up with a dollar amount return needed. This
restated is Dollars invested x percentage (stated as a decimal) = Dollar return on
investment.

Examples:

1) Investment of $50,000.00 @ 6% Return On Investment (ROI) would be calculated as
follows: $50,000.00 X .06 = $3,000.000 (Dollars return on investment)

2) Investment of $50,000.00 @ 20% Return On Investment (ROI) would be calculated as
follows: $50,000.00 X .20 = $10,000.00 (Dollars return on investment)


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